The Standard & Poor’s 500 Index rose above its record closing level, wiping out losses from the financial crisis, as economic growth slowed less than previously estimated and concern about Europe’s debt crisis eased.
McDonald’s Corp. and International Business Machines Corp. jumped at least 0.6% to pace advances among the biggest companies. GameStop Corp. rallied 4.9% after quarterly profit topped estimates. Deckers Outdoor Corp. increased 6.4% after Jefferies Group Inc. raised its price target. BlackBerry climbed 2.2% after reporting fourth-quarter results. Banks retreated, as Bank of America Corp. and Morgan Stanley lost at least 0.7%.
The S&P 500 increased 0.3% to 1,567.23 at 2:42 p.m. in New York, above its all-time closing high of 1,565.15 from Oct. 9, 2007. The Dow Jones Industrial Average climbed 34.51 points, or 0.2%, to 14,560.67. Trading in S&P 500 shares was 22% below the 30-day average at this time of day. U.S. markets will be closed tomorrow for a holiday.
“It’s about time,” said Robert Lutts, the president and chief investment officer at Cabot Money Management Inc., which oversees $500 million in Salem, Massachusetts. “We’ve gone through two bear markets in the last decade and equity investors have been really challenged in their conviction to hold through that period of time, but I think that we’re at the beginning of a very strong phase for equities, not at the end.”
The S&P 500’s advance above its record close marks a recovery from a bear market that wiped out more than $10 trillion of value from the world’s largest stock market. The gauge is up 9.9% for the quarter, its best performance in a year. It still remains below an all-time intraday high of 1,576.09. The Dow first surpassed its 2007 high on March 5.
Shares of American companies are rallying as their profits expand for a third straight year and the Federal Reserve commits to continuing its unprecedented monetary stimulus. Reports this week showing a 5.7% jump in durable goods orders and the biggest increase since 2006 for the S&P/Case-Shiller index of home prices in 20 cities were among the latest data points to fuel optimism in the economy.
Gains today came as gross domestic product rose at a 0.4% annual rate in the last three months of 2012, up from a 0.1% prior estimate and following a 3.1% pace in the third quarter, revised Commerce Department figures showed today. The reopening of banks in Cyprus after being closed since March 16 eased concern about Europe’s debt crisis. German retail sales, adjusted for inflation and seasonal swings, gained 0.4% last month from January.
The four-year bull market has sent the S&P 500 up more than 131% since it reached a 12-year low of 676.53. The rally is extending beyond the average length of bull markets, according to Birinyi Associates Inc. data that show cycles since 1962 have an average duration of four years. Of nine advances, four have lasted longer than the mean and the market rose for about six years during those periods.
“This has been a very broad-based rally in equities, it’s been global,” Stephen Wood, who helps manage about $163 billion as the New York-based chief market strategist for North America at Russell Investments, said by telephone. “Many fundamentals haven’t changed all that much in recent weeks and months, but it’s becoming apparent that momentum and sentiment are changing.”
Shares of retailers, restaurant chains and other companies that depend on discretionary consumer spending jumped more than 233% as a group since the bottom of the bear market to lead gains among the 10 main groups in the S&P 500. Gauges of financial and industrial companies have almost tripled, while technology, commodity and health-care stocks are up more than 100%.
Wyndham Worldwide Corp., CBS Corp., Fifth Third Bancorp and Gannett Co. are among seven companies in the index that have surged more than 1,000% since March 9, 2009.
The rebound in stocks came as the Fed pumped more than $2.3 trillion into the economy through monetary easing since 2008, sending Treasury yields to record lows last year. The S&P 500’s dividend yield, currently at about 2.1%, has been above the rate on 10-year Treasuries for almost a year.
Corporate profits have jumped to a record during the rebound, with earnings-per-share for S&P 500 companies projected to reach $110.51 this year from less than $62 in 2009, according to analyst forecasts compiled by Bloomberg. Alcoa Inc. will unofficially kick off the next reporting season when it posts first-quarter results on April 8.
The average year-end prediction of 17 Wall Street strategists surveyed by Bloomberg is for the S&P 500 to keep rising to 1,583. The gauge’s advance during the rally exceeds the average bull-market return of 120%, Birinyi data show. Two of the last nine cycles have rallied more than today’s advance -- the 302% gain in the 1990s and 229% in the 1980s, the data show.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, fell 1.5% to 12.95 today. The gauge, known as the VIX, dropped to its lowest level since February 2007 on March 11 and has retreated 28% this year.
McDonald’s gained 0.8% to $99.66 and IBM added 0.6% to $212.25 to pace advances among the largest companies.
EBay Inc. rallied 4.2% to $54.23. The operator of the world’s largest online marketplace said it expects to have merchandise volume of $110 billion by 2015 as its active user base expands to 200 million, aided by emerging markets.
GameStop rallied 4.9% to $27.75. The world’s largest video-game retailer reported fourth-quarter profit that beat analysts’ estimates, led by digital and mobile products.
Deckers surged 6.4% to $55.90. Jefferies analyst Randal Konik raised his price target on the Ugg brand owner to $100 from a previous estimate of $65, noting the likelihood of sheepskin prices falling this year.
BlackBerry, formerly known as Research In Motion Ltd., rose 2.2% to $14.88. The company, which is attempting a comeback with a new lineup of smartphones, reported a surprise profit in the fourth quarter after embarking on a cost-cutting program last year, even as sales continued to trail projections.
Banks declined among 24 groups in the S&P 500. Bank of America slid 0.7% to $12.15 and Morgan Stanley dropped 1% to $22.07.
An S&P index of homebuilders retreated 1.2%, as 10 of 11 members fell. Toll Brothers Inc. slid 1.7% to $34.16, while Lennar Corp. lost 1.4% to $41.21.
PVH Corp. dropped 5% to $107.12. The owner of the Tommy Hilfiger brand said earnings will be $7 a share for the year, less than the average analyst estimate of $7.41 a share.